Accessibility links

  • Skip to content
  • Accessibility Help

You are using an outdated browser. Upgrade your browser today for a better experience of this site and many others.

MENU
  • Home
  • About us
  • Services
    • Overview
    • Business start-up
    • Compliance services
    • Investments & Pensions
    • Support services
    • Taxation
  • Factsheets
    • Overview
    • Capital taxes
    • Corporate and business tax
    • Employment and related matters
    • Employment issues (tax)
    • General business
    • ICT
    • Pensions
    • Personal tax
    • Specialist areas
    • Starting up in business
    • VAT
  • Resources
    • Overview
    • accSEND
    • Downloadable forms
    • Market data
    • Online calculators
    • Tax calendar
    • Tax rates & allowances
    • Useful links
  • News
    • Overview
    • Statement
    • Budget
    • Hot Topic
    • Latest News for Business
  • Contact us
J R Watson & Co Accountants

Northampton: 01604 630745 Rugby: 01788 575037 Email us

Venture Capital Trusts

Venture Capital Trusts (VCTs) offer similar to breaks to individuals as the Enterprise Investment Scheme. They provide an opportunity to invest in unquoted trading companies via a VCT thus spreading the investment risk over a number of companies.

  1. Factsheets
  2. Personal tax

Venture Capital Trusts (VCTs) offer similar tax breaks to individuals as the Enterprise Investment Scheme. VCTs are managed by a variety of specialist fund companies. At J R Watson & Co Accountants, we advise individuals on tax efficient investments in the Northampton and Rugby area. Some information about VCTs is given below.

Venture Capital Trusts (VCTs) are complementary to the Enterprise Investment Scheme (EIS), in that both are designed to encourage private individuals to invest in smaller high-risk unquoted trading companies affected by the equity gap. While the EIS requires an investment to be made directly into the shares of the company, VCTs operate by indirect investment through a mediated fund. In effect they are very like the investment trusts that are obtainable on the stock exchange, albeit in a high-risk environment.

What is a VCT?

VCTs themselves are quoted companies which are required to hold at least 70% of their investments in shares or securities that they have subscribed for in qualifying unquoted companies. VCTs have a certain time period in which to meet the percentage test.

Other conditions are:

  • they must distribute 85% of their income
  • they must have a spread of investments with no single holding accounting for more than 15% of the value of total.

VCTs are exempt from tax on their capital gains and there is no relief for capital losses.

Reliefs available to investors

Income tax relief of 30% is currently available on subscriptions for VCT shares up to a limit per tax year of £200,000.

To qualify for income tax relief the shares must be held for a minimum of five years.

Investors are exempt from tax on any dividends received from a VCT although the credits are not repayable.

Capital gains arising on disposal of the shares are also exempt and for this relief, there is no minimum period of ownership. There is no relief for any capital losses.

Qualifying companies which a VCT can invest in

The definition of a qualifying company for VCT purposes is very similar to that applying for EIS. The company:

  • must be unquoted, although shares on the Authorised Investment Market (AIM) are deemed unquoted for this purpose. They may become quoted later.
  • must not deal in land, leased assets or financial, legal or accountancy services. In addition it must not be a trade that has a large capital aspect to it, such as property development, farming, hotels or nursing homes.

Over the years, governments make amendments to what are regarded as qualifying companies for a VCT to invest in. The thrust of the changes is to ensure well-targeted support for investment into small and growing companies, with a particular focus on innovative companies.

How we can help

It is not possible to cover all the detailed rules in a factsheet of this nature. If you are interested in investing in Venture Capital Trusts please contact us, at J R Watson & Co Accountants, for further information.

Charitable giving Child Benefit charge Dividends and interest Enterprise Investment Scheme Individual Savings Accounts Making Tax Digital for Individuals Non-domiciled individuals Personal tax - self assessment Personal tax - when is income tax and capital gains tax payable? Property investment - buy to let Property investment - tax aspects Seed Enterprise Investment Scheme Statutory Residence Test Taxation of the family Tax-Free Childcare Venture Capital Trusts

The latest news

09 May 2022

HMRC starts chasing up SEISS overpayments

HMRC has started to recover overpayments of Self-employment Income Support Scheme (SEISS) grants.

09 May 2022

UK government unveils energy strategy

Up to eight more nuclear reactors could be delivered to existing sites as part of the UK's new energy strategy.

09 May 2022

Treasury announces it will regulate some forms of cryptocurrency

The Treasury has announced that it plans to recognise stablecoins as a valid form of payment as part of a wider government initiative to 'make Britain a global hub for cryptoasset technology and investment'.

Home | Site map | Accessibility | Disclaimer | Privacy | Help |

© 2022 J R Watson & Co Accountants. All rights reserved.

Northampton Office: Chancery House, 52 Sheep Street, Northampton, Northamptonshire NN1 2LZ
Rugby Office: Sir Frank Whittle Business Centre, Great Central Way, Rugby, CV21 3XH

We use cookies on this website, you can find more information about cookies here.

powered by totalSOLUTION

Would you like to download our mobile app from the App Store?

Download
x